What to Do After You've Inherited Property
By Ted Ricasa
VIDEO: How I Squandered My Inheritance
If you have recently inherited a home from a loved one, you are possibly confused as to what exactly to do with it. The situation becomes even more confusing and potentially frustrating if the will stipulated multiple heirs to the home. Moments of clarity are probably few and far between.
In all likelihood, your loved one left the home to you in good faith, with the expectation that either the home itself or its sale would be of benefit to you. In many cases, however, heirs to homes end up inheriting an overwhelming amount of unanticipated difficulties and headaches. Whether your goal is to live in the home, rent it out, or sell it, the best way to honor the memory of your loved one is to make the decision that effectively protects your interests and the interests of your community. In order to do that, however, you must first know your rights and options as the owner of an inherited home.
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I recently inherited a home from a parent. Can I assume the current mortgage on the home?
If you decide to live in the home, you will most likely be allowed to take over the current mortgage. However, if you intend to rent the home out to someone else, the lender will probably require you to refinance in your name. If a reverse mortgage was taken out on the home, you cannot assume that mortgage.
Before you make the decision either to live in the home or to rent it out, be sure to investigate and carefully consider whether you can afford the mortgage, as well as the taxes on the property and other expenses associated with owning the home.
I inherited a home along with my siblings. What happens if we cannot agree on what to do with the property?
Most states consider multiple heirs to a home “tenants in common.” As such, any one of the heirs can force the sale of the home if he or she is so inclined. When this occurs, it is usually the result of a heavy strain on the familial bonds, whether due to money issues or a disagreement as to what should become of the home.
The death of a parent can have a devastating effect even on adult offspring. It is in the best interests of siblings in such situations to communicate openly and respectfully with each other and try to arrive at a unanimous decision regarding the home. Without consensus, heirs face a potentially long, drawn-out, and very expensive process that often results in their having to maintain a vacant house for far longer than was necessary.
What is the “death tax”? Will I have to pay an inheritance tax?
The so-called “death tax” is the informal name, popular in the media, given to the federal estate tax. As of January 1, 2013, the amount that can be excluded from the estate tax was raised from $5.12 million to $5.25 million. If the value of the estate exceeds $5.25 million, only that excess amount will be subjected to taxation, at a maximum rate of 40 percent. The heir or heirs are not responsible for paying the estate tax out of pocket; the tax must be taken out of the estate before the beneficiaries can receive their inheritance.
A small minority of states currently impose an inheritance tax. If your state requires the payment of inheritance tax, that tax will be split among the beneficiaries.
It is important that you know and understand the state and federal tax laws that may affect your inheritance as well as the potential sale or rental of the inherited home. While it is beyond the scope of this website to provide tax information for every possible circumstance in every state, if you decide to work with Fast Home Help, we will make sure that you understand the relevant tax laws thoroughly before you decide how to proceed.
Can I refuse to inherit a home?
If you are in line to inherit a home that is worth less than is owed on it or is at risk of foreclosure, you can file a written disclaimer refusing inheritance of the property. However, you must do so within nine months of the death of your loved one, and you cannot have benefited from the proceeds of the home in any way. Once an inheritance is disclaimed, it cannot be reclaimed.
It may be in your best interests to disclaim an inherited home if:
- The home is in such poor condition that selling it would be difficult without substantial repairs
- The property taxes on the home are extremely high, making it undesirable to keep and difficult to sell
- You cannot afford the mortgage payments on the home
- You wish to avoid an inheritance tax imposed by your particular state
If you disclaim an inherited home, you do not get to decide the next in line to inherit it. That determination is made by the probate court, guided by state law.
If you are unsure as to whether you would be better off selling your home for cash or disclaiming it, we encourage you to contact Fast Home Help. We will let you know whether we can make you an all-cash offer or whether filing a disclaimer is your best option.
What are the advantages and disadvantages of selling an inherited home for cash now versus going through a Realtor?
If you have decided to sell your inherited home rather than living in it, renting it, or disclaiming it, there are a number of options available to you. You can go through traditional channels to attempt to sell the home, or you can request a cash quote from Fast Home Help. As to which decision would be in your best interests, it depends entirely on your circumstances.
It may be advisable for you to sell the home through traditional means if:
- There is no mortgage on the home
- The home is in good shape and doesn’t require many repairs or much cleaning
- You can afford those repairs that are necessary and are willing to make them
- You can afford to pay any taxes and other fees that might come due during the selling process
- You are willing to wait months or even years to complete a sale, if necessary
On the other hand, you may want to request a cash quote from Fast Home Help if:
- The house is “underwater” (that is, it’s worth less than is owed on it), and you want to rid yourself of it as soon as possible
- There are mortgage payments due that you are unable or unwilling to pay and you want to do a short sale of the home
- You inherited the house along with your siblings, and you want to obtain money to split amongst yourselves as quickly as possible
- You or another heir has an urgent financial need
- You don’t want to endure the hassle of paying a real estate agent’s commission, closing costs, and other fees
- The home you inherited is in another city or state, and you don’t want to be responsible for the upkeep of a vacant house that isn’t in your vicinity
- There are tax benefits to selling your home as opposed to keeping it
- You simply want to be rid of the house and move on with your life
The purpose of Fast Home Help is to provide assistance to people just like you, people who are facing difficult decisions regarding their homes often due to circumstances beyond their control. To learn more about your options and rights as the owner of an inherited home, please contact Fast Home Help today. We can help you make the decision that is best for you, your family, and your community.
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The transaction went smoothly and we closed in 2 weeks, allowing me to cash out and move on with my life sooner than any other way of selling. I highly recommend Ron to my friends, my neighbors and to you! Thanks Ron! - Michael M.